EU’s Draft Fund Manager Pay Rules Will Backfire, Lawmaker Says
European Union proposals to limit fund manager bonuses are “crude” and would drive up fixed salaries if implemented, said Syed Kamall, a London lawmaker in the European Parliament.
The plan to ban managers of so-called UCITS funds from receiving bonuses larger than their fixed salaries would damage the link between pay and performance, Kamall, who is in charge of examining the draft rules for the parliament’s Conservative group, said in an e-mailed statement today.
“Unfortunately, there is simply an ideological objection from Christian Democrats, Socialists and Greens to high salaries,” he said. “This means that we are less focused on meaningful transparency of fees and making sure asset managers do not receive bonuses when their funds perform poorly.”
The draft rules for fund managers go beyond planned EU curbs on banker pay that would allow bonuses of twice fixed salary. European asset-management firms are concerned the proposal, which may affect two-thirds of senior fund managers, may cause a bidding war for their best-performing employees, increasing fixed costs and making the industry more vulnerable to market downturns.
EU lawmakers supporting the cap say their proposals will rein in risk-taking and better align the interests of fund managers with investors.
“It’s frustrating that we are not focusing on making sure asset managers’ fees and bonuses reflect their performance,” Kamall said.
Parliament lawmakers discussed the UCITS rules at a meeting this week in Strasbourg, France. Talks are set to continue on the measure prior to a vote by the full assembly. Members of the assembly’s economic and monetary affairs committee called for the fund manager bonus curbs earlier this year.
UCITS, or Undertakings for Collective Investment in Transferable Securities, had more than 6 trillion euros ($7.8 trillion) under management as of April 2012, according to the European Commission. The funds are regulated at EU level and have the right to operate throughout the 27-nation bloc if they meet minimum oversight and investor-protection standards.
The full parliament is set to vote on the measures before the end of July.
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